Inflation data over the coming week could determine whether stocks, which surged to record highs following Donald Trump’s decisive victory, can continue higher. The Federal Reserve cut interest rates by a quarter of a percentage point this week, a widely expected move ahead of October consumer and producer price data being released on Wednesday and Thursday respectively. Cooling inflation shows central banks can continue their easing cycle, which will support stocks that have been rising, in part due to price stability and a softening labor market. On the other hand, hotter numbers that threaten this narrative could upend these gains. “One of the things that’s supporting the market at this level right now is that the Fed is cutting interest rates,” said Art Hogan, chief market strategist at B. Riley Wealth Management. “I would definitely say anything that changes that view would definitely tip the apple cart. Down. ” .SPX 5D mountain S&P 500, over five days Currently, investors are optimistic that the Fed is expected to return to neutral, meaning that the federal funds target rate will return to a level that is neither expanding nor contracting for the economy. According to the CME FedWatch tool, the market currently expects a 64% chance that the Federal Reserve will cut interest rates by another 25 basis points in December. Overnight lending rates are expected to be between 3.5% and 4% by the end of 2025, down from the current range of 4.5% to 4.75%. Key Inflation Next week’s consumer price index (CPI) readings should give investors little reason to change the interest rate outlook, at least as far as economists are forecasting, although concerns remain. Economists surveyed by FactSet expect CPI to rise 0.2% in October from the previous month, unchanged from the previous month. On an annual basis, it is expected to rise 2.5%, up from the last reading of 2.4%. Excluding volatile food and energy prices, core inflation is expected to be stable at 0.3% and 3.3% on a monthly and annual basis respectively. Meanwhile, consensus estimates suggest that the producer price index (excluding housing) is expected to rise 0.3% in October, up from 0.0% the previous month. On an annual basis, growth is expected to be 2.3%, up from the previous estimate of 1.8%. “We’ve been concerned that inflation is sticky and could pick up due to base effects and shelter-in-place,” said Nancy Tengler, CEO of Laffer Tengler Investments. “I think that’s because the market expects interest rates to stay higher for longer. “High level.” “Trump trade” Of course, nothing seems to be able to hinder the stock market’s rise recently, and the “Trump trade” has caused investors in a wide range of markets to rejoice. This week, the Dow Jones Industrial Average topped 44,000 points for the first time ever, and both it and the S&P 500 are on pace to post their best weeks in a year. The Nasdaq is expected to end the week with strong gains. Financial stocks surged on promises of lower corporate taxes, and stocks in the biotech industry are also likely to see an increase in M&A activity. Bitcoin surges, gold falls. Small-cap stocks gained. Oil stocks rebounded, while renewable energy stocks fell. Chinese stocks fell. Even with this surge, many investors remain bullish on the market due to the strong fundamental backdrop. FactSet data shows that investors are about to usher in an optimistic third-quarter earnings season, with about 74% of the 450 S&P 500 companies that have reported earnings so far announcing positive surprises. The U.S. economy is strong, with the Atlanta Federal Reserve predicting real GDP growth of 2.5% in the fourth quarter. The market even absorbed the surge in bond yields, with the 10-year yield appearing to calm down at the end of the week, below 4.5%. US10Y 5D U.S. 10-year Treasury yields are high Even so, there are still some concerns, including unclear control of Congress, which may determine whether to extend tax cuts beyond 2025. Whether the proposed tariffs will go into effect. “Right now, the market appears to be able to focus on the positives of the new administration and be wary of potential negatives,” Hogan said. All times on the calendar one week ahead are Eastern. There were no events of note on Monday, November 11th. Tuesday, November 12, 6 a.m. NFIB Small Business Index (October) 5 p.m. Philadelphia Reserve Bank President Harker speaks at Carnegie Mellon University Gains: Occidental Petroleum, Live Nation Entertainment, Tyson Foods, Home Depot, Mosaic Wednesday 13 November 8:30am Consumer Price Index (October) 8:30am Hourly earnings final results (October) 8:30am Average workweek final results (October) 2pm Treasury Budget NSA (October) Earnings: Cisco Systems Thursday, November 14, 8:30 AM Continuing Unemployment Claims (11/02) 8:30 AM Initial Claims (11/09) 8:30 AM Producer Price Index (October) Earnings: Applied Materials, Walt Disney Friday, November 15, 8:30 am Export Price Index (October) 8:30 am Import Price Index (October) 8:30 am Empire Index (November) 8:30 am Retail Sales (October) 9:15 am Capacity Utilization (October) 9:15 am Industrial Production (October) 9:15 am Manufacturing Production (October) 10 am Business Inventories (September) Earnings: Progressive
